Financial analysis of Academic Bookstore Ltd

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500 Accounting Assignment


Financial analysis process of identify the capabilities, strengths and weaknesses of the business. It is the company's financial status to help the business to figure out how to act, how to act in the future be used to analyze the financial statements. This operation is to understand and improve the situation of company is performed by the company.

Profitability: Financial analysis of the company's earning power and profitability will help to review. The financial statements at fair value through profit or loss for a specific period and analyzed to check. It is suggested that the provision of business will help. On the basis of the financial statements of a company's current and future situation described.

Gross: Financial analysis is based on the financial statements presented by the gross of the business will help. It shows the extraordinary gross rates. Constitute a strategic plan for the future that will help the business. It provides a clear picture of the business, such as investors in the show if you can provide benefits.

Comparison: Financial analysis, competitors in the competition and will help you compare business. It allows improving the management of the business to determine where the fault is the best tool. Also provides trend of the business.

Different Accounting Methods: Financial analysis to compare the two companies will help a lot, but the problem here in this process, two different companies, which can lead to confusion with other methods can be used. In these circumstances, clearly it is difficult to compare the enterprise. Different of accounting methods will provide different of results, and future plans which will lead to a misunderstanding.

Accuracy of Financial Statements: That the audited financial statements cannot be guaranteed accurate. If there is a problem with the calculation, it can cause real financial analysis. This can cause other problems. Financial analysis is a major loss of customers does not provide information about a big problem. Dealing with money as it is completely qualitative factors and elements that are not included.

2013

2014

Gross in sales %

2013 = ((5000-5300)÷5300)*100

2014 = ((6000-5000)÷5000)*100

-5.67%

20%

Gross Profit Margin %

2013=(1450 ÷ 5000)*100

2014=(2100 ÷ 6000)*100

29%

35%

Gross Profit Mark up %

2013=(1450 ÷ 3550)*100

2014=(2100 ÷ 3900)*100

40.84%

53.84%

Administrative Expenses %

2013=(375 ÷ 5000)*100

2014=(490 ÷ 6000)*100

7.5%

8.16%

Selling Expenses %

2013=(425 ÷ 5000)*100

2014=(520 ÷ 6000)*100

8.5%

8.67%

Financial Expenses

2013=(105÷500)*100

2014=(190÷6000)*100

2.1%

3.17%

Net Profit Before tax %

2013=(545÷5000)*100

2014=(900÷6000)*100

10.9%

15%

Return on Equity %

2013=(385÷((1895+2200) ÷2))*100

2014=(630÷((2200+2430) ÷2))*100

18.8%

27.2%

Return on Assets %

2013=(385÷3835)*100

2014=(630÷5000)*100

10.04%

12.60%

Inventory Turnover

2013=(3550÷1500)

2014=(3900÷1750)

2.37

2.23

Age of Account Receivable

2013=(((600+600) ÷2)*365) ÷3000

2014=(((600+720) ÷2)*365) ÷4200

73%

57.3%

Current Ratio

2013=2515÷1120

2014=2520÷1590

2.25:1

1.58:1

Liquid Ratio

2013=(2515-1700)÷1120

2014=(2520-1800) ÷1590

0.72:1

0.45:1

Debt Equity Ratio

2013=(1120+515) ÷2200

2014=(1590+980) ÷2430

0.74:1

1.06:1

Equity Ratio

2013=2200÷(2515+1320)

2014=2430÷(2520+2480)

0.57:1

0.49:1

Interest Cover

2013=(545+80) ÷80

2014=(900+160) ÷160

7.83

6.63

The Academic Bookstore Ltd’s the financial analysis report.

The purpose of this report is the financial analysis presents the results of Academic Bookstore Ltd. This report will be prepared for the Director of Academic Bookstore Ltd. Financial statements are used to determine financial state of business. This report presenting the results of the analysis, they can progress the performance of the company for management of high so provides a useful recommendation. Financial statements a strategic plan for the future, past and present, that was used to obtain financial information. This report profitability, asset utilization, and will include the company's overall financial stability analysis.

PROFITABILITY

Ratio and percentage of profit margins over time to generate and control the cost at the same time used to measure the ability of financial metrics. This business is a financial indicator to assess the exact position of the market is very important. In this report, the profitability ratios and the percentage of Academic Bookstore Ltd used to evaluate the situation of the company. This ratio and the ratio is clearly profit, loss or expense represents the increase or decrease. Earning profit is expected that the first of any business. Profit is money; The Company earns by providing the service and industrial products. In this section, revenue gross, gross margin, gross profit mark-up, and costs, including net profit and return of capital, such assets, So all cover profitability ratios and percentages.

Gross in Sales

It is compared to the previous year, or a specific period of sales gross. So Academic bookstore Ltd sales in 2013 was very low increase rate. This company was not doing good business, it was -5.66% but the company is to achieve a situation can be handled carefully. In 2014, Gross is a good sign in terms revenue increased by 20%. The company also came out negative figure. It will benefit the company shows that strong. It's good for the company and its stakeholders.

Gross Profit Margin

Gross profit margin shows the profit margin earns for the company because of the gross in sales. In this case, the Company is doing really well. The Gross profit margin was 29% but Gross margin increased to 35% in 2014. It is the company's savings to pay for future gross margin because it provides a long-term business. Thus, the financial analysis of the financial condition of the Academic Bookstore Ltd shows a clear picture.

Gross Profit Mark-up

The gross profit mark-up on goods purchased for sale use the company shows the mark-up that Academic Bookstore Ltd is doing well by analysing the financial statements. Because of sales gross, gross profit mark-up is a good sign from 53.84% to 40.84%. It shows that company is doing well in business. In 2013 and 2014, the gross margin of between 9.22% mark-up to be a clear difference.

Administration Expenses

Administrative expenses are related to the whole Company's general and administrative expenses. They just do not relate to a specific department. It is included administrative expenses about office staff wages, depreciation, and miscellaneous expenses. Academic Bookstore Ltd’s financial statements in the period of 2013 to 2014 are 8.17 to 7.50 percent increases in the cost of these shows. If the business is growing, then it is automatically clear that it would increase the cost. The increase in administrative expenses compared to revenue gross is not so much so that, if possible, management should take it into consideration; they can try to reduce these costs.

Selling Expenses

Any expense which is directly or indirectly caused by the cost of sales activity is known to sell. That shows how much the company is spending to sell products. In 2013, the Academic Bookstore Ltd has increased 9.17% in 2014 and spent a percentage of 8.90 as selling expenses. It needs to earn more profit is nominal expenditure, so I can say that company’s doing well and saving money.

Financial Expenses

Finance costs are clearly related to the funding and mortgage interest costs are included. It includes long-term debt interest expense. In the case, Academic Bookstore Ltd’s in financial expenses are gone by more 1% from 1.60 to 2.67. So This Company has pay a huge amount of mortgages and interested which is not really well. Dramatic increases in the cost of financial could harm the reputation of the company in a. It may be due to a huge debt.

Net Profit before Taxes

Net Profit before taxes is providing services before paying the taxes or the profit that earned by the company by selling well. This tax must be paid on time to avoid in future problems. Academy Bookstore Ltd, the company is really doing well. Net profit before taxes to pay for increased 10.90% to 15%. This is a result of increased sales. However, This Company keep in mind that still have to pay the tax and calculate net profits.

Return on Equity

Equity or owner’s equity is the owner of the company’s capital investment. Check the company's return on equity is a profitability measure that evaluates that how much profit is created by the company with certain amount contributed by the investors. Academic Bookstore Ltd is a significant increase in equity returns. The Company’ revenue gross equity shows form 18.80 in 2013 to 27.21 in 2014. So this company is good enough for its owner to earn profit by doing well.

Return on Assets

Return on Assets is a Generate income by increasing the resources used by a company's ability to evaluate the method. It is used by the company profit generated by the quantity of assets is evaluated. It provides an overview of management that how effective it is in using to generate earnings for the assets. Return on assets of the Academic bookstore Ltd’s increased from 10.03% to 12.60%. It is a good sign for the company and investors.

ASSET UTILIZATION

Asset utilization, using the assets of the company is described in the profit earned.There are a lot of ratios comes under the asset utilization that introduce the turnover and details of spending business. It shows a long-term and short-term investment. This ratios help to management to get the best out of make revenues and assets and show total revenues and compared to expenses. This ratio can be managed to help get the best total return on assets and resources to be able to make a profit compared to the cost.

INVENTORY TURNOVER

Inventory turnover is companies selling or deposit is replaced by a deposit is used to display the number of times. In case of displaying a low inventory turnover, it is not good for the company because basically a stock is just sitting in a warehouse for a long time has not been profitable. Low inventory turnover may be a result of over-stock. So inventory turnover shows that how often any company can take out the inventory from system for a given period of time. So Academic bookstores Ltd of inventory turnover is down 2014 as compared to 2013 which is not a good sign.

AGE OF ACCOUNTS RECEIVABLE

Age of accounts receivable shows how many days it take to company to receive money from debtors to the company. It shows the customer or debtor to display all of the outstanding balance of periodic reports. If the number of days is less then the company will be good because available to additional cost for investment or spending the expenses immediately. But a large number of day’s receivables are not good for the day.

In the case of the Academic Bookstore Ltd, the accounts receivable in 2013 was 73days but will decreased to 57.36 in 2014 which is a good sign. The Company's getting the money from debtors; it will increase revenue of the company.

FINANCIAL STABILITY

Financial stability is defined in the company's financial stability. Financial stability is long term and short term financial requirements help to satisfy of the company. If a company is not stable that can lead to bankruptcy. Thus, flow analysis and financial ratio, capital adequacy ratio, financial stability ratio, such as debt-to-equity ratio is important to find.

CURRENT RATIO

Current rate is typically used to measure the fluidity to the company. It's basically shows the assets and liabilities of the Company's ability to pay back. Current assets are the assets can be quickly converted into cash. So the Academic bookstore Ltd, the ratio was 2.25:1 in 2013 to 1.58:1 in 2014, it is fallen down. So it is bed sign for the company because the company is down in terms.

LIQUID RATIO

Liquid ratio of short-term debt and liabilities shows the company's ability to pay back. It is called a quick ratio; it calculates the quick assets and current liabilities. Liquid ratio is the ideal ratio of 1:1. The Company debts on time so that you can use every one of the current debt show that current assets. The liquid ratio is 0.73:1 in 2013 to 0.45:1 in 2014 that came down. It is bed sign. The company cannot able to pay back. In order to maintain a good reputation in the market, the company has to pay off the debt within the time required.

DEBT EQUITY RATIO

Debt equity ratio is the company's financial leverage. Shareholders' equity is calculated by dividing total liabilities. It is the capital of the relationship between creditors and shareholders will be measured. Academic bookstore Ltd’s debt equity ratio was 0.74:1 in 2013 to 1.06:1 in 2014 that increased. So that will be risky for investors in the company.

EQUITY RATIO

The equity ratio is stockholders are used to measure the share of total assets which are financed. That describe how much equity can be used for financing the assets. The Academic Bookstore Ltd’s equity ratio is slightly decreased 2013 to 2014. So the company's situation may change slightly, but not too bad.

INTEREST

The company will also record the statement of income and gains to get interested in it and keep the cash in another account. Less concern for some companies, but for other companies, such as insurance companies is a good source of income. The Academic Bookstore Ltd interest rate was 7.81% and it will be decreased to 6.63% in 2014.

Recommendations

Liquidity Ratio

Liquidity ratio is decreased in 2013 as compare to 2013. It cannot able to pay back current quick liabilities that are big problem. The company is unable to pay back short-term debt to invest in if you do not have anyone. Management is needed for the work and other related aspects that affect the ratio.

Administration Expenses

Administration Expenses are another problem about increased in 2014 as compare to 2013. Add this The Company benefit to bring down expenses of the burden. Management is needed for the work to improve performance, such as merging the department Management cost can be reduced.

Debt Equity Ratio

Debt equity ratio is an important area of ​​gross in 2014. It is 0.74:1 in 2013 but increase to 1.06:1 in 2014. It is a problem. Investors in the company will find a risky business. Management is needed for the work the contributing factors to decrease the ratio.

Current Ratio

The problem is the company's current ratio was reduced in 2014. It was come down from 2.25:1 in 2013 to 1.58:1 in 2014. It shows that company is unable to pay back debts in the future. Management is needed to improved performance In order to increase Current ratio. So that company remains in a stable condition.

Academic Bookstore Ltd is doing well in sales. The company sales increased in 2014. So that sale of the company to earn more profits and revenue. The company's sales in 2013 were significantly reduced but the company has handled the situation carefully and got a 20% increase in sales.

Age of accounts receivable, the company is really well done in this area. In 2013, but the age of the receivables was seventy-three days but in 2014 come down from 57.36 which is better. It shows that company is getting outstanding money faster than the last year.

Conclusion

The Academic Bookstore Ltd’s the financial analysis report. Provide a clear picture of the business. It’s analysed the financial statements to determine the profitability, Asset utilization, and the company's financial stability. It is two years to assess the market of the company position shows a comparison. It is profits, revenue and expense, as well as to assess the company's position in the market for two years compared. So it shows the trend of company. The company has to increase profits and sales are really good for a 20% increase in 2014, because the company has performed well in the sales field. Increased sales increased operating costs at the same time. All ratios in order to obtain an overview of the entire company analysed. In addition, this report is the current ratio, current ratio, debt equity ratio, equity ratio, such as financial stability in the form of a large proportion describes. This report will support to directors of the Academic bookstore to improve of all the key areas.

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